The big problem with SIM vs LIVE is people that are really too under capitalized start trading SIM and do well. But when they go live inevitably the psychology of fear kicks in, they are afraid to lose money so start to exit early or skip setups due to fear.
Or they trade 10 lots in SIM while having a $10K real account and again inevitably go live and wipe out.
The key really is to trade small enough or with an account big enough so that they are in the "I don't care" zone when dealing with losses. Only then will SIM come remotely close to LIVE and have any value as a learning tool.
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Agree... one of the things that helped me the most as I became profitable was the confidence I built by SLOWLY increasing my size so that I had time to psychologically adjust to the size of my losses. I trend follow in my long-term trading, so there are A LOT of losses. There are months now where I lose more money than I make working my full-time job... but it doesn't effect me because I got there SLOWLY.
If you're new and you think you want to risk 1 or 2%, here's some advice... start at 1/10 that amount to let yourself become accustomed to the dollar size of the loss... then once you're OK, step up a little bigger. Repeat until you're (un)comfortable and then comfortable.
Don't think about how much you can WIN, think about how much you can LOSE.
Last edited by JerseyJim; March 25th, 2015 at 06:15 PM.
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Biggest thing I experienced going from SIM to REAL was the fact fills in SIM are no where near how they work in real life.
Stop-Loss on Simulation: On simulation you can set your Stop-loss the market hit's it and your trade is closed out. Don't we all wish this is how it really happened?
Stop-Loss on Real Trades: I've had Stop-losses set and Market momentum drive right through my price point and fill 20 ticks away in the past. It's the nature of the beast especially on high volatility instruments. I've had it happen to a lesser degree on some of the calmer instruments.
Limit Order on Simulation: You can set limit orders on simulation, and when the market comes to that price point your filled near instantly. Again this is nowhere near how it happens in real trading.
Limit Order on Real Trades: You have to set your order many price points in advance to get a near instant fill on a limit order when the market hits your price point. Again it will depend on the instrument and liquidity in that instrument. But I've had to place orders 6-8 ticks out thinking ahead to ensure I had a order that was first in the batch to be filled. Simulation cannot teach you these things. I've also had Take-Profit orders hit there price point, not fill go back down and turn into losing trades. I've since solved that by other means as back up protection to juts a TP order.
There are many other examples, but those are the two basic ones. Pretty much the concept you need to grasp is your fills on simulation are instant. In the real world they are not! My suggest to anyone who's been trading SIM is try a few trades on a micro future like m6e and just sorta start to grasp how the fills occur. Only reason I suggest M6E is the capital involved to place a contract is low, as is the dollar amount per tick.
Last edited by Branzol; March 25th, 2015 at 04:34 PM.
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This is true, but I think an even bigger problem is while trading in sim people go through hundreds of iterations of a "system", constantly changing things, and never really learning anything about the market itself. They are so focused on "signals" from their system and risk avoidance they never actually educate themselves as to why markets move and how to capture those moves.
I feel like you must actually have skin in the game before that part of your brain takes over and the real learning begins.
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First off, thank you guys I needed this post. I started trading live 2 months ago and I haven't blown my account yet, but I am getting close of not being able to cover my margin costs for the instruments I trade (futures). I sim traded for a week and quickly realized that it wasn't for me. Not saying there is no value, I just didn't get vested enough to care for the trades. I ended taking trades without thinking, changing my entry rules, putting abnormal stops (stops I wouldn't risk with real cash), not logging my entries, etc.
As of right now, I'm focusing on biggest hurdle; state of mind/psycology. It really sucks to lose, and it sucks even more to lose again. And now, I need to find a way to stop the snowball effect of making terrible decisions and not being able to focus because I... well... feel like a loser. I believe that in order "to trade like a pro I should learn how to lose like a pro", so I'll resume my trading once I've made my peace with it. But as of today, it still sucks. Would've been able to understand and deal the state of mind that I am in by reading books or sim trading? I don't think so, not me.
Back to the original topic of blowing a real account, is it really necessary? I hope not, but I haven't met a successful trader that haven't blown one or two. If it is really necessary, then I am sure taking the right steps towards becoming a successful trader.
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Blowing up an account (no matter how large or small) isn't necessary to become successful, but what it has a tendency to do is smack you upside the head with reality. It also seems to separate the pretenders from the contenders.
If you're willing to assess the damages after blowing up, then regroup and come back to attack with the new knowledge gained, you're on your way. There's no guarantee of success, but you're a step closer than you were before. Like the old proverb says, "A journey of a thousand miles begins with a single step". I also like "A man who wishes to travel a hundred miles should consider himself halfway at 90 miles."
Just ask yourself the hard questions... are you willing to commit the time (and money) that this will take to succeed? Look at it like any other profession... you need years of dedication and experience to become successful... and even then it still doesn't happen for everyone.
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Agreed.. When I switched to Sim I already had 'skin in the game' after blowing a couple of small accounts a couple of years earlier, so I took Sim very seriously to the point where it felt and hurt as much as real money. Had I started with Sim then gone live it would have been a different story.
It's true that fills aren't the same but it is possible to trade well in Sim and maintain the same discipline and psychology live. Although not common, it is possible, which is the point I was trying to make.
After all, losses are just a cost of business and money is a byproduct of good trading.
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